The World Bank’s B-Ready review process will be applied this year, 2026, to Australia’s business laws, including “business insolvency”, according to their respective ratings on three pillars, with a percentage score assigned to each. These pillars are the regulatory framework (pillar 1); public services (pillar 2); and operational efficiency (pillar 3).
Business Insolvency
B-Ready’s “Business Insolvency” topic measures
“key features of insolvency systems on a regulatory level. It also assesses the institutional and operational infrastructure associated with insolvency proceedings (judicial services), as well as the operational efficiency of insolvency proceedings across three different [pillars]”.
The first pillar assesses the quality of regulation by way of judicial insolvency proceedings — liquidation and reorganization, covering de jure features of a regulatory framework that are necessary for structured debt resolution processes and effective creditor and debtor regimes.
The second pillar measures the quality of institutional and operational infrastructure for judicial insolvency proceedings, thus assessing the de facto aspects of insolvency resolution mechanisms and the infrastructure required to implement the legal framework on insolvency.
The third pillar measures the time and cost required to resolve in-court liquidation and reorganization proceedings.
All well and good, but
This is all well and good but it is inherently limited in assessing business insolvency in Australia, and in most jurisdictions.
In a rather naïve statement in its 764 page B-Ready, Methodology Handbook, Final 2nd ed, December 2025, (Methodology), this is said:
“5.2.2 Debtor Company Justification: The limited liability company (LLC) is the most prevalent legal form of company adopted worldwide to conduct business. LLCs can also shield the personal assets of its members from legal claims related to the business. In other types of firm arrangements, the members and/or partners are held personally liable, which would entail individual and/or personal insolvency—which falls outside the ambit of corporate insolvency examined in the B-READY project. Focusing solely on limited liability companies allows the relationship between creditors and debtor to be examined within the insolvency framework alone without other forms of liability arising”.
In my response:
- around 70% of small businesses in Australia operate outside a corporate structure.
- most small corporate businesses operate in a blended form of personal and corporate liabilities and assets, such that, personal asset protection is not assured. This because of personal guarantees, and tax and other liabilities; and
- the insolvency of such businesses is difficult to manage because of the separation of personal and corporate insolvency laws, practitioners and courts.
The Australian 2023 PJC Report likewise found that most small corporate businesses operated in a blended form of personal and corporate liabilities and assets, the Small Business Ombudsman reporting that around 50% of small business borrowings are secured over the person’s home. And around 40% of bankruptcies are business related.
The Assistant Treasury Minister, Dr Andrew Leigh, has noted that
“decades of incremental [insolvency] reform have resulted in a framework that is complex for individuals and small business owners, whose personal and corporate finances often overlap. Any future improvements will need to reflect real‑world experience …”: AFSA Summit, 18 November 2025.
The Methodology is not consistent with the World Bank’s own acknowledgement of these issues. As its 2017 Report on the Treatment of MSME Insolvency says,
“micro, small, and medium enterprises (MSMEs) are among the largest commercial users of insolvency systems. MSMEs are a significant part of the global economy – and just as there are large numbers of MSMEs, there are large numbers of MSME insolvencies. However, there are a very few specialized legal regimes for MSME insolvency; most jurisdictions treat MSME insolvencies the same as for other corporate entities, or conversely, natural persons, despite MSMEs’ unique attributes”.
It continues that
“studying MSMEs is difficult because there is no consistent or universally accepted definition of the term. Countries and international organizations apply different measurements and tools when determining whether an enterprise should be labelled as micro, small, medium, or large”.
This is all the more reason why a broad scope of business insolvency should be examined under its B-Ready processes.
The B-Ready Methodology adopts a limited and theoretical approach to that reality. It could have assessed countries’ business insolvency processes in full.
Business bankruptcies
As to business bankruptcies, the 2017 MSME Report itself acknowledges a finding that
“the more forgiving the personal bankruptcy laws, measured particularly in reference to the time a bankrupt individual has to wait to be discharged from pre-bankruptcy debts, combined with ready access to limited liability protections, the more entrepreneurial activity was enhanced”.
Australia’s present law reform focus is on extending the time to respond to a bankruptcy notice from 14 days to 21.
World Bank Insolvency Principles
Then there is the review of Australia’s ‘business insolvency’ laws from the perspective of the World Bank’s 2021 Principles for Effective Insolvency and Creditor/Debtor Regimes. See World Bank’s 2026 B-Ready review of Australian business insolvency and other laws – Murrays Legal
To be welcomed
The World Bank’s B-Ready review of Australia’s competition, tax, employment and other business laws is to be welcomed, with learning and comparisons from its findings serving to feed into our law reform and institutional improvements.
And despite my concerns about the limitations of the Methodology, its review of our business insolvency laws and processes will be instructive and will now be assisted by both personal and corporate insolvency coming under one minister – Dr Leigh.
He has extolled the merits of comparative data which, by country comparison, the B-Ready process will provide. Comparison with New Zealand’s B-Ready report will be interesting.
The B-Ready process will also assist in any comprehensive review of our insolvency laws as recommended by the 2023 PJC Report.
